The Associated Press State & Local Wire
SAN FRANCISCO: State regulators proposed a plan Monday they said would allow Pacific Gas and Electric Co. to emerge from bankruptcy by January, without raising customers’ electric rates.
The plan filed by the California Public Utility Commission would have PG&E ratepayers contribute $4.7 billion while the company’s parent company PG&E Corp. would forgo $1.6 billion in profits. The utility would also sell common stock to raise an extra $1.75 billion.
Currently, the utility’s only stockholder is its parent company, but the PUC plan would make about 20 percent of the utility’s stock available on the open market.
The PUC‘s plan would also return the utility to a cost-of-service ratemaking process, giving PG&E a guaranteed rate of return on the electricity it sold. That and paying the utility’s debts in full and in cash, will restore the utility’s credit rating to an investment grade, said PUC general counsel Gary Cohen.
“We expect PG&E to come out of bankruptcy in January with $3.6 billion in cash,” Cohen said.
PG&E is also building a cash surplus, Cohen said, that should top $2.7 billion by January, because the utility has collected more in rates since March 2001 than it has spent buying power.
Ratepayers will also pay $2 billion to refinance $3.86 billion in debts over ten years, Cohen said.
Consumer advocate Doug Heller called the PUC‘s plan a “$4.7 billion ratepayer-funded bailout of PG&E.”
“The only reason they can come up with the $4.7 billion is by illegally maintaining the artificially high electricity rates until January 2003,” said Heller, who works with the Foundation for Taxpayer and Consumer Rights.
PG&E officials said the plan was “no more practical or confirmable” than the PUC‘s first attempt at a reorganization plan.
The PUC‘s proposed stock sale also threatens the “tens of thousands of our employees and retirees whose 401(k) accounts” and retirement funds include PG&E stock.
PG&E filed for Chapter 11 bankruptcy protection in April 2001, claiming more than $8 billion in debts that it accrued when wholesale energy costs soared above the consumer rates that were capped by the state’s deregulation laws.
The utility’s own reorganization plan would have the company spin its power plants, electricity and natural gas distribution systems into separate companies that would be under the corporate umbrella of the federally regulated parent company.
PG&E says federal regulators would let it charge market rates for the electricity it generates, boosting their value and allowing it borrow more than $4 billion against them to pay creditors. State regulators currently control how much PG&E can charge for its power.
Critics, including the PUC, called the plan PG&E‘s way to escape state oversight.
Under the PUC‘s plan, “PG&E will not be broken up. It will remain an integrated utility when it emerges,” Cohen said. “As required by state law, PG&E will return to cost-of-service rates, saving consumers billions of dollars.”
Both plans provide for the utility’s creditors to be paid in full. The utility and the regulators each also say their plans would not increase consumers’ electric rates. The PUC plan could also allow for a rate decrease in January 2003, when the utility emerges from bankruptcy, but officials couldn’t say Monday how much a decrease would result.
If U.S. Bankruptcy Judge Dennis Montali approves, both plans could go out simultaneously for a vote by creditors.
“The bankruptcy code does provide for competing plans,” said Cohen.
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On the Net:
Pacific Gas and Electric Co.: http://www.pge.com
Bankruptcy Court: http://www.canb.uscourts.gov
Public Utilities Commission: http://www.cpuc.ca.gov
